Why Our Medical Practice is Dying

September 25, 2017

Here's why practices like ours can't thrive in this new environment. MGMA has the data to back it up.

Our solo pediatric practice, a micro-practice that delivers concierge-level services without membership fees to patients, is dying a certain death. Before we settle on options for what comes next for us, we want to better understand how we got here. How did a once thriving, financially successful and independent practice hit a financial dead end? Thanks to David N. Gans, senior fellow at MGMA Industry Affairs, we're starting to understand the whole, complex picture.

Looking back now, we thought we were so clever! Our start-up business plan from 2006 cited an article from Archives of Pediatric and Adolescent Medicine, which stated that a full-time pediatric practitioner could accommodate an average panel size of 1,546 patients. With that knowledge, we sat down with our pro forma financial statements and, calculating conservatively, figured that a solo pediatrician could limit his panel size to 775 patients, about half of the 1,546, but still earn as much as his peers by cutting overhead costs in half. A physician in a micro-practice has less staff to pay and more time with patients. It was simple and over the years we couldn't figure out why so few physicians were practicing in micro-practices. To us, the experience was idyllic.

In 2006, we saw our first patient. Like any start-up, it took a few years to get going, but by 2009 we had reached our projected financial goals. In 2013 and 2014 we so exceeded our financial expectations, we booked an elaborate vacation through Italy and Greece to celebrate our 15th wedding anniversary in 2015. This success only increased our hubris.

And then everything changed. Sometime between us booking our anniversary trip in early 2015 and going on that trip later in the same year, the business started to die. In truth, most independent primary-care practices at the time were dying and we wrote about it at the time pointing to the death-grip the insurance oligopoly held on U.S. healthcare.

For the past two years, we told anyone who would listen that our model was failing because our model couldn't accommodate growing patient volumes we believed were common at large practices. You see, for years we'd hear from peers all the time how incredibly busy they are, some claiming to see 35 – 40 patients a day, five to six days a week. These volume claims seemed believable to us. One would have to see that many patients a day to bring in enough revenue to handle the increase in fixed overhead costs.

To confirm our belief, we reached out to the Medical Group Management Association (MGMA) to see what hard data they could share. In truth, we wanted to show the world how dangerously high the volume at large practices had become. MGMA was agreeable, and believing our theory had merit, set to work pulling the data. What the data showed, however, proved us completely wrong.

"Our data looks at patients encounters, not patients a day or panel size," explained Gans. According to the Provider and Compensation Report Glossary of Common Survey Terms, an "Encounter" is defined as follows:

"A documented, face-to-face contact between a patient and a provider who exercises independent judgment in the provision of services to the individual in an ambulatory or hospital setting. If a patient with the same diagnosis sees two different providers on the same day, it is one encounter. If a patient sees two different providers on the same day for two different diagnoses, then it is considered two encounters. Encounters should include only procedures from the evaluation and management chapter (CPT codes 99201-99499) or the medicine chapter (CPT codes 90800-99199) of the Physician's current Procedural Terminology, Fourth Edition., copyrighted by the American Medical Association (AMA)."

This distinction makes the data more accurate, as panel size is not as predictive when outside factors, like an increase in high deductible plans, has an effect on patient demand.

A surprised Gans reported to us that, "Over the past six years, we show a 20 percent decrease in patient encounters. I believe that physicians might feel like they are seeing more patients because quality measures and other administrative tasks have forced them to spend more time thinking about each patient. This added work might give the illusion that they are seeing more patients, but really they are seeing less but spending more time on each patient's paperwork."

This surprising data sparked our curiosity as to how did our number of encounters compare to the national data. In the graphs below, we present both the MGMA data plus our micro-practice data.  We're small and minor things have big impacts on our data, still the overall trend is fascinating. We went from seeing about a third of a typical FTE provider patient encounters down to a half. In other words, the big guys weren't getting busier, we were!

Gans continued, "The increase in quality measures, patient satisfaction scores, and ACOs have done a lot to force providers to slow down and question more the care each patient is receiving. Of course, the cost of that oversite is exactly what is driving small practices like Performance Pediatrics out of business."

The reality of our situation cannot be denied. Perhaps we could start charging a fee for our concierge-level care, but that would mean we only cater to a certain segment of the population. If we want to keep providing care to the whole community, the only option is to become an employed physician.

Predicting the end of our practice is like getting a terminal diagnosis. Knowing it's going to die doesn't make the experience of it any less heartbreaking. What do you think? Why do you think we're failing and what should we do about it?  

Source: MGMA DataDive Provider Compensation 2017.  Used with permission from MGMA, 104 Inverness Terrace East, Englewood, Colorado 80112.  877.275.6462.  www.mgma.com.  Copyright 2017 MGMA.